6 Tips to Help Prepare Your Children for Financial Success
It’s no secret that many adults struggle with financial literacy. In fact, according to a recent study, only 57% of adults exhibit traits of financial literacy. From taking on too much debt to failing to save for retirement to not understanding the importance of risk diversification, many adults are unable to achieve their financial goals simply due to a lack of financial education.
Unfortunately, few schools teach basic concepts of personal financial management, so it falls on parents and grandparents to educate the next generation. How can you ensure the children in your life are prepared for financial success? The following tips can help you teach your kids basic financial concepts to help them successfully navigate their finances as adults.
#1 – Start early.
The sooner you start teaching your children concepts of prudent financial management, the better. Introduce basic concepts like earning, saving and spending wisely at a young age. Teach them the value of money and the importance of delayed gratification. Instilling these fundamental principles early on lays the groundwork for sound financial decision-making later in life.
#2 – Lead by example.
Children learn by observing, so modeling good financial habits is essential. Discuss your financial decisions with your children or grandchildren, explaining your reasons behind them. Show them how you pay bills, save for the future and prioritize purchases according to your values. Your positive example will have a lasting impact on your children’s financial behavior.
#3 – Teach budgeting.
Budgeting is a vital financial skill that many adults don’t fully grasp. Teach your children how to create a budget by allocating their income/allowance into different categories, such as saving, spending and giving. Encourage them to track their expenses, prioritize their spending and saving, and regularly review their progress toward their goals. Help your teenagers open and manage bank accounts. Introduce them to the basics of building good credit.
#4 – Encourage saving and goal setting.
Teaching children the importance of saving from an early age gives them a better chance of achieving their financial goals as adults. As an alternative to buying your children the latest toy or clothing item, teach them how to save for it. Consider setting a plan to meet them halfway as an incentive. Discuss how much the item costs and strategies for setting aside a portion of their weekly allowance toward that purchase. This lesson will foster discipline, teach the importance of long-term planning and give your child a sense of pride and accomplishment when they can finally make that big purchase.
#5 – Foster entrepreneurship.
Nurture an entrepreneurial mindset in your child or grandchild by encouraging creativity and critical thinking. Help them explore a wide range of interests and hobbies and talk about potential business opportunities. Discuss various money-making ventures, such as starting a small business, freelancing or selling crafts online. By fostering an entrepreneurial spirit, you can instill a sense of independence, resourcefulness, self-confidence and financial resilience.
#6 – Offer resources.
Provide children with age-appropriate books, articles and online resources that reinforce the financial concepts and skills you’re teaching (creativeplanning.com/insights is a great place to start). Please encourage them to ask questions and discuss money matters. As teenagers, consider enrolling them in a personal finance course. The more children understand about personal finance, the better equipped they’ll be to make sound financial decisions as adults.
Could you use some help setting your children or grandchildren up for financial success? Creative Planning is here for you. Our teams have experience helping clients navigate a wide range of financial planning decisions to achieve their version of financial success. To take the first step, schedule a call with a member of our team.